Solar Power: Tackling Barriers to Widespread Deployment

Transcription

1 Solar Power: Tackling Barriers to Widespread Deployment Marilyn A. Brown, Ph.D Professor, School of Public Policy Georgia Institute of Technology and Visiting Distinguished Scientist Oak Ridge National Laboratory December 15, Lee Raymond, the former CEO of ExxonMobil, famously remarked in 1997 that: non-petroleum sources of energy are merely fashionable, and the with no readily available economic alternatives on the horizon, fossil fuels will continue to supply most of the world s energy needs for the foreseeable future.

2 Barriers to deployment are interrelated, overlapping & reinforcing an Iron Triangle Lock-in of Incumbent Technologies Unfavorable Policy Environment High costs Unfavorable regulations Industry structure Carbon Lock-In Incomplete and Imperfect Information Uncertain Fiscal Policy Uncertain Regulations Business Risks of Innovation Infrastructure Limitations Lack of specialized knowledge Burdensome permitting High Transaction Costs Systems of interrelated, overlapping, and reinforcing barriers Lock-in of incumbent technologies: positive feedback between government, financial institutions, suppliers, and existing infrastructure systems contribute to technology lock-in and maintain status-quo technologies even in the face of superior substitutes. Business risks of innovation: inventions and innovations face an array of obstacles in the marketplace, and since many GHG-reducing technologies are relatively new, these obstacles can strongly impact them. High transaction costs: costs associated with gathering and processing information, developing patent portfolios, obtaining permits, and designing and enforcing contracts can all be prohibitive during the early stages of a technology s deployment.

3 Cost Effectiveness High Costs Technical Risks Market Risks External Benefits and Costs Lack of Specialized Knowledge Fiscal Barriers Unfavorable Fiscal Fiscal Uncertainty Regulatory Barriers Unfavorable Regulations Regulatory Uncertainty Statutory Barriers Unfavorable Statutes Statutory Uncertainty 11 deployment barriers were identified as critical for renewables Intellectual Property Barriers IP Transaction Costs Anticompetitive Patent Practices Weak International Patent Protection University, Industry, Government Perceptions Other Barriers Incomplete and Imperfect Information Infrastructure limitations Industry Structure Misplaced Incentives Policy Uncertainty Those identified as critical to renewable fuels and power are outlined here. These eight most critical barriers will be elaborated upon in the following slides.

4 The lack of a price on carbon impedes all CCTP* sectors Number of Technology Sectors Impacted by Each Barrier External Benefits and Costs Barrier Types (Defined in Ch. 2) High Costs Technical Risks Market Risks Lack of Specialized Knowledge Unfavorable Fiscal Policies Fiscal Uncertainty Unfavorable Regulations Regulatory Uncertainty Unfavorable Statutes Statutory Uncerta inty Anti competitive Patent Practices IP Transaction Costs Weak Internation al Patent Protection University, Industry, Government Perceptions IP Barriers Fiscal Barriers Regulatory Barriers Statutory Barriers CCTP Goal Areas Energy End -Use & Infrastructure Energy Supply Carbon Capture and Storage Non -CO2 Gases Cost- Effectiveness Barriers Incomplete and Imperfect Information Infrastructure limitations Industry Structure Other Barriers Policy Uncertainty Misplaced Incentives *CCTP = Climate Change Technology Program

5 Myths Abound: Renewable Energy Could Never Meet America s Growing Electricity Demand This myth is strong, especially in the U.S. Many analysts dismiss renewable power as hopelessly impractical a pipe dream. Yet, U.S. renewable electricity has experienced a compound average growth rate of ~ 10% Sources: AWEA, IEA, NREL, EIA, GEA Skeptics argue that solar and wind power are hopelessly impractical and are far too diffuse and intermittent to ever provide more than a small fraction of the energy needs of any major industrialized nation, let alone vast northern countries like Canada and the United States. (EnviroTruth.org) Lee Raymond, the former chief executive officer of ExxonMobil, famously remarked in 1997 that non-petroleum sources of energy were merely fashionable, and that with no readily available economic alternatives on the horizon, fossil fuels will continue to supply most of the world's energy needs for the foreseeable future." (Raymond, 1997) Such ideas have infiltrated the news media. One news commentator, for instance, referred to renewable energy as a pipedream with dubious prospects.

6 Current Renewable Electricity Policy: A Chaotic Landscape Purchase obligations range from 8 to 30%. Source: Pew Center on Global Climate Change 1 REC = 1 MWh Notes: Compliance buyers are generally indifferent to the type of resource that created the REC (insofar as it qualifies), but they are limited to a specific geographic region from where the REC can be sourced In compliance market, in 2007 Texas will demand 5.5 million RECs alone (followed by Massachusetts with 1.8 million RECs) Voluntary market in 2005 was ~8.5 million RECs (Bird & Sweezy, 2006, Green Power Marketing in the U.S.)

7 Net metering is critical to PV success, but it s highly variable More states are. Source: DSIRE, 2007 (1)Net metering is used to measure a customer's total electric consumption against that customer's total on-site electric production. When on-site production exceeds use, the customer sends electricity to the grid, and when use exceeds production, the customer uses electricity from the grid. The customer then pays the local electric provider only for the net electricity consumed.

8 Almost half of the states have renewable energy funds more than half do not Source: Pew Center on Global Climate Change Almost half the states have funds, often called public benefit funds, dedicated to supporting energy efficiency and renewable energy projects. The funds are collected either through a small charge on the bill of every electric customer or through specified contributions from utilities. The charge ensures that money is available to fund these projects. Publicly managed clean energy funds from twelve of these states have formed the Clean Energy States Alliance to coordinate public benefit fund investments in renewable energy. The Clean Energy States Alliance is composed of funds in California, Connecticut, Illinois, Massachusetts, Minnesota, New Jersey, New York, Ohio, Oregon, Pennsylvania, Rhode Island, and Wisconsin.

9 Investment Tax Credits Come and Go Current Credits 120 Estimated Impact of Extending/Modifying the Solar ITC on U.S. Installed Photovoltaic Systems Figure 2: Estimated Impact of Extending/Modifying the Solar ITC o U.S. Installed Photovoltaic Systems 30% ITC: solar energy $2,000 cap for residential solar systems Cummulative Installed PV (GW) Base Case ITC 30% Year Extension of solar ITC for 8 years through 2016 would accelerate installations to as much as 100 GW by 2030* * DOE/EERE analysis Federal solar tax incentives enacted in the Energy Policy Act of 2005 allow homeowners a tax credit of 30% for qualifying solar electric (PV) or solar water heating expenditures, up to a maximum of $2,000 per technology. For businesses, the investment tax credit is increased from 10% to 30% of qualified solar property expenditures, with no cap on the credit amount. These incentives apply to equipment placed in service during

10 U.S. companies are moving manufacturing overseas to take advantage of higher incentives U.S. market share of global PV production has fallen behind Japan, Germany, & China Incentives Incentives Firms's Contribution Firm s Contribution Euros (million) (million) First Solar Evergreen Solar Current renewable energy policies may be insufficient. The majority of solar manufacturing facilities are built off-shore as companies look abroad for attractive manufacturing incentives and market transformation policies. The U.S. is steadily falling behind the rest of the world in solar manufacturing capacity

11 Conclusion 1: Multiple barriers require multiple remedies Interviews and literature provided consensus that a market signal (a price on carbon) is the greatest need But there are numerous barriers Thus, no single policy remedy will be sufficient Indeed, current federal activities attempt to address most of these barriers.

12 Conclusion 2: Public failures may be as important as market failures Numerous policies place clean energy technologies at a comparative disadvantage.* A range of policies have design flaws that undermine their intended outcomes. These distortionary policies create confusion in the marketplace. Can a platform of policy reform get any traction? *See Governing Confusion Interventions to fix market failures have produced an array of public failures.